RTTNews - The dollar slumped versus most majors on Monday, giving back initial gains after a manufacturing survey from the Chicago area showed a better-than-expected improvement in August.

Hopes of an economic recovery fueled increased risk appetite, even as global stocks tanked. Chinese shares were hammered overnight and US shares were firmly in the red, helping to give the safe haven buck a small measure of support.

The Chicago Purchasing Managers Index stood at 50.0 in August compared with 43.4 in July and above the 43.4 economists expected. Readings over 50 indicate overall business expansion.

While certain sectors of the economy may be showing signs of being on the mend, the job situation remains grim. The most important economic report of the unfolding week will be the Labor Department's non-farm payroll employment report for August, which is due out on Friday.

The dollar slipped back to 1.4360 versus the euro, moving within a penny of its 2009, set earlier in August. The pair has been bouncing back and forth since then, with traders expressing little conviction about the prospects of a global economic recovery.

Meanwhile, the buck slipped to 1.6300 versus the sterling, down more than a cent from its early highs.

The buck touched its lowest since July 12 versus the yen, hitting 92.53 before stabilizing. Over the weekend, an election win by the Democratic Party of Japan ended a half-century of almost unbroken rule by the Liberal Democratic Party.

The buck failed to sustain its early advance versus the loonie, falling back to C$1.0980 from a 2-week high near C$1.1100.

Canada's real gross domestic product increased 0.1% as expected in June, the first monthly increase in eleven months, according to official data released by Stats Canada on Monday.

For the second quarter as a whole, GDP shrank at an annual rate of 3.4%, compared with a contraction of 6.1% in the first three months of 2009.

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